CFPB TOPICS CFPB SUPERVISORY HIGHLIGHTS COLLECTIONS UADAAP ARBITRATION ENFORCEMENT ACTIONS MORTGAGE SERVICING RULES

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1 CFPB TOPICS CFPB SUPERVISORY HIGHLIGHTS COLLECTIONS UADAAP ARBITRATION ENFORCEMENT ACTIONS MORTGAGE SERVICING RULES

2 AUTOMOBILE LOAN SERVICING In the Bureau s recent auto servicing examinations, examiners identified an unfair practice relating to repossession at one or more automobile servicers. It is an unfair practice to repossess vehicles where borrowers had brought the account current, entered an agreement with the servicer to avoid repossession, or made a payment sufficient to stop the repossession, where reasonably practicable given the timing of the borrower s action.

3 AUTOMOBILE LOAN SERVICING In the Bureau s recent auto servicing examinations, examiners reviewed how servicers are overseeing repossession agents and how repossessions are conducted. Servicers provide options to borrowers to avoid repossession once a loan is delinquent or in default. Servicers may have formal extension agreements that allow borrowers to forbear payments for a certain period of time or may cancel a repossession order once a borrower makes a payment.

4 AUTOMOBILE LOAN SERVICING Servicers wrongfully coded the account as remaining delinquent, customer service representatives did not timely cancel the repossession order after borrowers made sufficient payments or entered an agreement with the servicer to avoid repossession, or repossession agents had not checked the documentation before repossessing and thus did not learn that the repossession had been cancelled.

5 AUTOMOBILE LOAN SERVICING Credit Unions should develop, implement, and consistently follow policies and procedures to insure that correct action is has taken place when autos are repossessed. Implement a system that requires repossession agents to verify that the repossession order is still active immediately prior to repossessing the vehicle, for example, through a specially designed mobile application for that purpose.

6 CREDIT CARD ACCOUNT MANAGEMENT PAY-BY-PHONE Deceptive misrepresentations to consumers regarding costs and availability of pay-by-phone options. Lender allowed to accept pay-by-phone : Live person (non automated system). The payment must be an expedited payment (meaning the day of or the next day for the payments due date).

7 CREDIT CARD ACCOUNT MANAGEMENT PAY-BY-PHONE Establish controls over communications to consumers ensure representatives inform consumers of free payment options prior to authorization of an expedited phone payment, and reimburse fees to consumers impacted by the deceptive representations about the costs and availability of pay-by-phone options.

8 CREDIT CARD ACCOUNT MANAGEMENT ADD-ONS It is considered deceptive marketing and sales practices if misrepresenting product features, such as the cost and coverage of the optional debt cancellation add-on product. Ensure representatives make accurate disclosure of the add-on product s terms, conditions, and costs, and to reimburse the costs of the credit card add-on products to impacted consumers.

9 CREDIT CARD ACCOUNT MANAGEMENT BILLING ERROR RESOLUTION (1) failed to provide consumers with a timely written acknowledgement of receipt of a billing error notice. (2) generally failed to timely comply with the billing error resolution procedures. (3) failed to limit the liability of cardholders for unauthorized use to the lesser of $50 or the amount of money, property, labor or services obtained by the unauthorized use before the card issuer is notified.

10 CREDIT CARD ACCOUNT MANAGEMENT BILLING ERROR RESOLUTION (4) before a billing error was resolved, made or threatened to make an adverse credit report concerning the consumer s credit standing, or that the amount or account was delinquent, because the consumer failed to pay the disputed amount or applicable related finance or other charges. (5) failed to timely correct billing errors and credit consumers accounts with disputed amounts or related finance or other charges, as applicable. (6) failed to send, or failed to timely send, consumers a correction notice where the issuer concluded that the billing error occurred as asserted.

11 CREDIT CARD ACCOUNT MANAGEMENT BILLING ERROR RESOLUTION (7) failed to conduct, or failed to timely conduct, a reasonable investigation before determining that no billing error occurred. (8) failed to provide, or failed to timely provide, consumers with a written explanation for its determination as to why it concluded that a billing error did not occur.

12 CREDIT CARD ACCOUNT MANAGEMENT BILLING ERROR RESOLUTION The root cause of these regulatory violations can be attributed to weak oversight of service providers that handle dispute resolutions. Management failed to perform sufficient due diligence of a service provider hired to perform intake of incoming phone calls from customers who reported billing errors and other disputes, and ceased doing business with the service provider because of increasing complaints about the service provider s customer service. Maintain sufficient documentation of monitoring of service providers and audit oversights of service providers.

13 FAIR DEBT COLLECTION PRACTICES ACT FDCPA provides consumers with protections from unethical, abusive, coercive or unfair collection practices. FDCPA does not apply to Credit Unions collection their own loans from debtors.

14 MICHIGAN REGULATION OF COLLECTION PRACTICES ACT This Act IS applicable to Credit Unions as collectors. Provides for private remedies to allow a victim recovery of actual damages or $50, or equitable relief. Michigan law also provides for treble damages or $150 for willful violations, and allows for attorney's fees for willful violations.

15 PROHIBITED PRACTICES Stop communication upon request Calling incessantly with the intent to annoy or harass Communicating with consumers at their place of employment Contacting consumer known to be represented by an attorney Communicating with consumer after request for validation has been made Misrepresentation or deceit

16 MORE PROHIBITED PRACTICES Publishing the consumer's name or address Seeking unjustified amounts Threatening arrest or legal action Abusive or profane language Communication with third parties Reporting false information on a consumer s AUTHORIZED USERS ARE NOT LIABLE FOR DEBT

17 PROPER BEHAVIOR FOR COLLECTION OF A DEBT Identify that communication from a debt collector and information is used for that purpose. Identify where the debt was originally incurred, give the name and address of the original creditor. Notify the consumer of their right to dispute the debt. Provide verification of the debt if a consumer sends a written dispute or request for verification.

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19 OVERDRAFT FEES BEING ASSESSED INACCURATELY Taking transactions out of the order they're made. Some financial institutions have a policy of processing the highest payment first before smaller debit card transactions. Failing to properly disclose how "opt-in" practices can work. Failing to explain how balances are calculated. Deceptive descriptions of how fees will be assessed open institutions up to class action claims.

20 HAS YOUR CREDIT UNION ASSESSED MULTIPLE OVERDRAFT CHARGES WHEN YOU BELIEVED YOU HAD A SUFFICIENT BALANCE? CFPB model opt in form say: An overdraft occurs when you do not have enough money in your account to cover a transaction, but we pay it anyway. Credit Unions who use available balance, must accurately define what is available balance. When not doing so, courts have interpreted the credit union to be using Actual Balance, not available balance.

21 ARBITRATION The CFPB Arbitration Rule prohibits Credit Unions from banning through use of terms and conditions or contracts with members from filing of lawsuits. Credit Unions may include a provision for language around arbitration but must inform members they are still entitled to bring a case in court.

22 ARBITRATION Providers that enter into a Pre-Dispute Arbitration Agreement on or after March 19, 2018 must ensure that the agreement contains the following provision at the time that the parties enter into the agreement: We agree that neither we nor anyone else will rely on this agreement to stop you from being part of a class action case in court. You may file a class action in court or you may be a member of a class action filed by someone else. Additional language required if a previously instituted arbitration agreement is in effect on documents.

23 ARBITRATION The U.S. Senate will soon likely vote to kill a new ban on banks and credit card companies requiring customers to surrender their right to sue in order to open accounts, according to aides, lobbyists and activists. -Reuters, Senate poised to repeal new rule allowing consumer class actions 9/27/17 As of this writing no vote has taken place. Political experts are split as to the success of a repeal attempt.

24 UNFAIR DECEPTIVE ABUSIVE ACTS & PRACTICES Unfair, deceptive, or abusive acts and practices can cause significant financial injury to consumers, erode confidence, and undermine the financial marketplace. CFPB on UDAAP, Supervision and Examination Manual

25 UNFAIR DECEPTIVE ABUSIVE ACTS & PRACTICES The Dodd-Frank Act prohibits conduct that constitutes an unfair act or practice. An act or practice is unfair when: (1) Causes or would likely cause harm (2) Member s can t easily avoid this harm (3) Benefits to the Credit Union as a whole are not greater than the harm to the member Actually being harmed is not necessary. An increased likelihood of real harm is enough.

26 UNFAIR DECEPTIVE ABUSIVE ACTS & PRACTICES The Dodd-Frank Act also prohibits conduct that constitutes a deceptive act or practice. An act or practice is deceptive when: (1) The act or practice misleads or is likely to mislead the consumer; (2) The member made a reasonable interpretation (3) The misleading information effect the member s decision.

27 UDAAP EXAMPLES Threatening to sue with no intent of suing. Pretending to be an official or government representative. Making empty threats, including that lawsuits may follow that are never intended to be filed. Giving false or misleading information to secure a member s agreement to terms. Assessing fees or charges not unauthorized for or in a way that was not originally agreed. Stating something will affect credit.

28 UDAAP VIOLATION Money penalty of $1,500,000 to UMB Bank, N.A., Kansas City, Missouri, the bank was found to have billed customers for a credit monitoring or credit report retrieval service the customers had not activated, as a result of deficient vendor management practices. The bank was also issued an order to cease and desist, and an order for restitution.

29 UDAAP VIOLATION Required restitution of approximately $3 million to harmed consumers, and assess civil money penalties from Bank of Lake Mills, Freedom Stores, and MCS violated federal law prohibiting unfair and deceptive practices by, among other things: Charging interest to consumers who paid off their loans within six months when the loans were promoted as six-month interest free; Selling add-on products in conjunction with loans originated by the bank without clearly disclosing the terms of those products; and Failing to provide consumers the opportunity to exercise the monthly premium payment option in conjunction with the purchase of optional debt cancellation coverage on loans originated by the bank through the Freedom Stores and MCS channels.

30 UDAAP EXAMINATION MANUAL 2012 CFPB Examination Manual Resource examiners and enforcement agents use in determine whether a UDAAP violation has occurred. When determining internally whether compliance with UDAAP has been met rely on guidance in Examination Manual.

31 CFPB ENFORCEMENT ACTIONS September 6, CFPB took action against Zero Parallel, LLC who sold consumers payday and installment loan applications to lenders it knew were likely to make void loans that the lenders had no legal right to collect. The CFPB found that Zero Parallel committed an abusive practice by selling loan applications to lenders in a manner that prevented consumers from understanding the risks, costs, or conditions of the loans they were offered, and it entered an order imposing injunctive relief and a $100,000 penalty. Additionally, the proposed order against CEO would require payment of $250,000 in penalties.

32 CFPB ENFORCEMENT ACTIONS July 31, 2017 CFPB Compliance Bulletin- In the course of its Supervision and Enforcement activities, the Bureau has identified conduct that may violate or risks violating Federal consumer financial laws relating to phone pay fee practices. Failing to disclose the prices of all available phone pay fees when different phone pay options carry materially different fees. Misrepresenting the available payments options or that a fee is required to pay by phone. Failing to disclose that a phone pay fee would be added to a consumer s payment could create the misimpression that there was no service fee. Entities are advised to review applicable laws and procedures when assessing fees.

33 CFPB ENFORCEMENT ACTIONS National Collegiate Student Loan Trusts and their debt collector, Transworld Systems, for illegal student loan debt collection lawsuits. Consumers were sued for private student loan debt that the companies couldn t prove was owed or was too old to sue over. These lawsuits relied on the filing of false or misleading legal documents. The proposed judgment requires an independent audit of all 800,000 student loans in the National Collegiate Student Loan Trusts portfolio. It prohibits the Student Loan Trusts, and any company they hire, from attempting ac on any loan the audit shows is unverified or invalid. In addition, it requires payment of $19.1 million, which includes initial redress to harmed consumers, relinquished funds to the Treasury, and a civil money penalty. Under a separate consent order, Transworld Systems is ordered to pay a $2.5 million civil money penalty.

34 CFPB ENFORCEMENT ACTIONS April 27, 2017-CFPB took action against mortgage servicer Fay Servicing for failing to provide mortgage borrowers with the protections against foreclosure that are required by law. The Bureau found that Fay violated the CFPB s servicing rules by keeping borrowers in the dark about critical information about the process of applying for foreclosure relief. The Bureau also found instances where the servicer illegally launched or moved forward with the foreclosure process while borrowers were actively seeking help to save their homes. The CFPB has ordered Fay Servicing to stop its illegal practices and pay up to $1.15 million to harmed borrowers.

35 CFPB ENFORCEMENT ACTIONS CFPB ordered Nationstar Mortgage LLC to pay a $1.75 million civil penalty for violating the Home Mortgage Disclosure Act by consistently failing to report accurate data about mortgage transactions for 2012 through Today s action is the largest HMDA civil penalty imposed by the Bureau to date, which stems from Nationstar s market size, the substantial magnitude of its errors, and its history of previous violations. In fact, Nationstar had been on notice since 2011 of HMDA compliance problems. The CFPB s Order requires Nationstar to: Pay a $1.75 million penalty: Develop and implement an effective compliance management system. Fix HMDA reporting inaccuracies.

36 CFPB ENFORCEMENT ACTIONS CFPB took action against Navy Federal Credit Union for making false threats about debt collection, pay or be sued, to its members, which include active-duty military, retired servicemembers, and their families. Navy falsely threated to contact commanding officers to pressure servicemembers into repayment. The credit union also unfairly restricted customers account access when the consumers had a delinquent loan. Navy Federal Credit Union will correct its debt collection practices, give approximately $23 million in redress to victims, and pay a $5.5 million civil money penalty.

37 MORTGAGE SERVICING RULES This rule applies to all entities that service consumer first lien mortgage loans whether the loan is retained in portfolio by the originator or is sold into the secondary market and the entity services the loan for an investor. This rule does not cover: Reverse mortgage loans; Bridge loans; The construction phase of a construction to permanent loan; Loans for business purposes secured by a consumer s dwelling; or Mortgages secured by farm or agricultural properties where the lender is a qualified lender under the Farm Credit Act of 1971

38 MORTGAGE SERVICING RULES Small Servicer Exemption The Bureau has created a small servicer threshold that will exempt smaller servicers from mandatory compliance with some of the provisions in the rules. A small servicer is defined as one that services 5,000 or fewer consumer mortgages which they or an affiliate own or originated. In August of 2016 the Bureau amended the small servicer designation to permit small servicers to service mortgages for certain non-profit entities where they are not compensated, and to service seller financed mortgages (subject to certain restrictions) for which they may be compensated.

39 PERIODIC BILLING STATEMENTS (SMALL SERVICERS ARE EXEMPT FROM THIS SECTION) All creditors, assignees and servicers, except small servicers, must provide a periodic billing statement for each billing cycle that contains the following information: Amount due; Due date; Late fee information; Explanation of amount due (includes a breakdown of amounts allocated to principal and interest, and escrow including the total sum of any fees or charges and the amount of any past due payment); Past payment breakdown of what s been allocated to principal, interest, escrow, late fees etc.; and Transaction activity

40 ADDITIONAL REQUIRED INFORMATION ON PERIODIC STATEMENTS Certain messages, such as detail on the application of partial payments or funds held in a suspense account. Contact information for the servicer. Current unpaid principal balance. Current interest rate. Next interest rate change date (if applicable). Contact information for homeownership counselors. Additional delinquency information if the borrower is more than 45 days past due.

41 SPECIAL REQUIREMENTS FOR BORROWERS IN BANKRUPTCY Servicers must provide periodic statements or coupon books to borrowers in bankruptcy, with certain exceptions, or who have discharged the loans. Statements will vary depending on the chapter of bankruptcy that applies to the borrower. Statements to all borrowers in bankruptcy must include: A statement which identifies the borrower s status as a debtor in bankruptcy. The discharged status of the loan. The periodic statement is being provided for informational purposes only. Information regarding late payments, fees, and foreclosure status may be omitted.

42 SPECIAL REQUIREMENTS FOR BORROWERS IN BANKRUPTCY Statements to borrowers in bankruptcy under Chapter 12 or 13 must include: Post-petition payment due; any post-petition fees, charges or amount past due. Any transaction activity for both pre- and post-petition since the last statement. Additional notifications directing the borrower to send payments to the trustee as required by their plan, that the amounts shown may not reflect all payments to the trustee, and that the borrower should contact their trustee.

43 SPECIAL REQUIREMENTS FOR BORROWERS IN BANKRUPTCY Statements to borrowers in bankruptcy under Chapter 12 or 13 must include: Post-petition payment due; any post-petition fees, charges or amount past due. Any transaction activity for both pre- and post-petition since the last statement. Additional notifications directing the borrower to send payments to the trustee as required by their plan, that the amounts shown may not reflect all payments to the trustee, and that the borrower should contact their trustee.

44 SPECIAL REQUIREMENTS FOR BORROWERS IN BANKRUPTCY Exemptions. Servicers are not required to send periodic statements to borrowers in bankruptcy if any one of the following occurs: The borrower requests the servicer to cease sending the statements. The bankruptcy plan provides for the surrender of home securing the loan by the borrower. Bankruptcy court orders the lien avoided.

45 SPECIAL REQUIREMENTS FOR BORROWERS IN BANKRUPTCY Other Periodic Statement Requirements: Servicers are not required to send periodic statements if a loan is charged off, subject to certain conditions. Statements to borrowers in temporary loss mitigation programs must show payment application per the original loan contract; however, the amount due can reflect the amount owed under the temporary loss mitigation program or the original loan agreement. Statements to borrowers in a permanent loss mitigation program should reflect the terms of the permanent loss mitigation program

46 SPECIAL REQUIREMENTS FOR BORROWERS IN BANKRUPTCY Small Servicers are exempt from all of the periodic statement requirements listed above. Delivery to the Borrower: The periodic statement must be provided/sent either electronically or by regular mail to the borrower within a reasonably prompt time after the close of the grace period of the previous billing cycle. CFPB, four days after the close of any grace period would be considered reasonably prompt. Billing Cycle: The billing cycle corresponds to the frequency of payments from the borrower as evidenced by the note and mortgage/deed of trust/loan modification documents.

47 SPECIAL REQUIREMENTS FOR BORROWERS IN BANKRUPTCY Coupon Book Exemption: The provisions of this exemption are listed below. Applies to fixed-rate/fixed payment mortgages only. Required information on each payment coupon: Payment due date; Amount due; and Amount of any late charge and the date incurred. Required information included in the coupon book itself, but not necessarily on each coupon: Principal balance (when coupon book issued); Interest rate; Amount of any prepayment penalty; Contact information for the servicer and homeownership counselor; and How the consumer can get more current information on their loan

48 SPECIAL REQUIREMENTS FOR BORROWERS IN BANKRUPTCY Coupon books continued Required information to be made available to consumers (so called dynamic information ): Breakdown of monthly principal, interest and escrow amounts; Total of all payments received; Any past due amounts or other amounts owed; Any payments held in suspense; Total transaction activity; Total of any fees or charges applied to the account and when they occurred; and Information must be made available either orally, in person, electronically, or in writing; delinquency information must be made in writing as a separate communication.

49 INTEREST RATE ADJUSTMENT NOTICES FOR ARMS Interest Rate Adjustment Notices for ARMs Applies to all servicers who service ARM loans. New notice of first adjustment required to be sent to borrower days prior to the first adjustment. Subsequent adjustment notices must be sent days prior to the adjustment of the borrower s payment. If an interest rate change does not result in a payment change, then no notice is required. Applies to all ARM loans serviced.

50 PROMPT CREDITING OF PAYMENTS AND PROVISION OF PAYOFF STATEMENTS Applies to all servicers. Borrower payments must be credited as of the day of receipt. Partial payments must be accepted and either held in a suspense account or credited to the borrower s account. Once the amount in the suspense account covers a full payment it must be credited to the borrower s account. Servicers must provide an accurate payoff balance to the consumer within seven business days of receipt of a written request.

51 FORCE-PLACED INSURANCE Servicer cannot charge borrower for force-placed coverage unless: Servicer has reason to believe borrower has allowed coverage to lapse; First notice is sent 45 days prior to charging borrower for force-placed insurance; and Second notice is sent at least 30 days after the first notice and at least 15 days before charging the borrower for force-placed coverage.

52 FORCE-PLACED INSURANCE Servicer must cancel any force-placed coverage and refund any premiums paid during periods of overlapping coverage. For loans that are escrowed, servicers must continue to advance premiums and cannot obtain force-placed insurance. Small servicers are exempt from this provision provided the force-placed coverage is less than any disbursement from the escrow account the servicer would have made to maintain the borrower s insurance coverage.

53 ERROR RESOLUTION AND INFORMATION REQUESTS Servicers must respond to a written notification of an error from a borrower as follows: Must acknowledge any written notice of error within 5 business days of receipt unless error is corrected; Must acknowledge error is corrected in writing; and all errors must be corrected within 30 days of receipt of a written request. Servicers must maintain policies and procedures to ensure that oral requests for information and notices of errors are resolved quickly.

54 GENERAL SERVICING POLICIES, PROCEDURES AND REQUIREMENTS (SMALL SERVICERS ARE EXEMPT) Establish and maintain policies and procedures to achieve the following: Provide accurate and timely information to borrowers, investors, courts. Confirm a person s status as a successor in interest. Properly evaluate loss mitigation applications per investor guidelines. Monitor compliance of service providers. Facilitate transfers of servicing. Inform borrowers of written error resolution requests.

55 GENERAL SERVICING POLICIES, PROCEDURES AND REQUIREMENTS (SMALL SERVICERS ARE EXEMPT) Maintain the following and be able to provide it in a servicing file within 5 days of receipt of a request from a borrower: Schedule of payments credited or debited to the borrower s account; Escrow payments and history; Copies of the borrower s security instrument; Collection notes made by the servicer reflecting communication with borrower; Any data fields relating to a mortgage loan account created by servicer s auto dial and response system regarding collection activity; and Copies of documents provided by the borrower to the servicer in connection with the collection of their mortgage loan account.

56 DEFINITION OF DELINQUENCY Delinquency begins on the day that a periodic payment sufficient to principal, interest, and escrow is due and unpaid until such time as no periodic payment is due and unpaid. Servicer may consider a borrower not delinquent if they make a partial payment. Servicers may credit payments to the oldest missed payment. Foreclosure referral waiting periods are advanced when a borrower makes a payment. Failure of the borrower to pay the full amount due following exercise of the acceleration clause would begin or continue a delinquency.

57 EARLY INTERVENTION WITH DELINQUENT BORROWERS (SMALL SERVICERS ARE EXEMPT) Servicers, except small servicers, must: Establish or make good faith efforts to establish live contact with delinquent borrowers by the 36th day of delinquency. Where appropriate, inform delinquent borrowers of available loss mitigation options. Provide written notice of loss mitigation options by the 45th day of delinquency.

58 CONTINUITY OF CONTACT (SMALL SERVICERS ARE EXEMPT) Servicers, except small servicers, must establish reasonable policies and procedures which would provide delinquent borrowers access to personnel from servicer s staff who are qualified to assist them with loss mitigation options if applicable. This staff must be: Accessible by phone; Assigned to the borrower by the 45th day of delinquency; Able to assist borrower with any loss mitigation options that may be available to them;

59 CONTINUITY OF CONTACT (CONTINUED) Able to advise the borrower on the status of any loss mitigation application and the applicable timelines; and Able to access all information provided by the borrower to the servicer and provide that information to staff responsible for evaluating the borrower for loss mitigation alternatives

60 LOSS MITIGATION PROCEDURES Small servicers are exempt from this section, but must follow these two rules: The servicer may not file first notice for foreclosure unless the borrower is more than 120 days delinquent; and The servicer may not proceed to foreclosure or sale if a borrower is performing under the terms of a loss mitigation agreement. Servicers, except small servicers, must have specified procedures for loss mitigation.

61 LOSS MITIGATION PROCEDURES Servicers, except small servicers, must have specified procedures for loss mitigation. Servicers must acknowledge receipt of a loss mitigation option within 5 days, informing the borrower if the application is complete or not and what information is missing. Servicers must exercise reasonable diligence to obtain needed documents to complete the application.

62 LOSS MITIGATION PROCEDURES Complete loss mitigation applications must be reviewed within 30 days if received more than 37 days prior to foreclosure sale. Borrower must be evaluated for all loss mitigation options they may be eligible for in accordance with the investor s rules, including both retention of the home (modification) and non-retention of the home (short sales). Servicers must evaluate a borrower for a loss mitigation option more than once during the life of the loan subject to certain conditions.

63 LOSS MITIGATION PROCEDURES Servicers must provide borrower a written decision, including reasons for denial of any option, and provide any data used to make any net present value calculation. Borrower may appeal the decision as long as a complete loss mitigation application is received 90 days or more before a scheduled foreclosure. Dual tracking is restricted; servicer may not start the foreclosure process unless the borrower is not eligible for loss mitigation option and all appeals have been exhausted, or the borrower rejects all loss mitigation options, or the borrower fails to comply with the terms of any loss mitigation option (trial modification).

64 LOSS MITIGATION PROCEDURES Servicers may not move to obtain a foreclosure judgment, or conduct a foreclosure sale, if a borrower submits a complete application for a loss mitigation option after the foreclosure process has started but more than 37 days from a foreclosure sale. Servicers cannot move forward with foreclosure unless borrower is not eligible for loss mitigation options and all appeals have been exhausted, or the borrower rejects all loss mitigation options, or if a complete loss mitigation application is pending, or the borrower fails to comply with the terms of any loss mitigation options.

65 LOSS MITIGATION PROCEDURES Servicers must collect information for all loss mitigation options even if the borrower has a preference for a particular option. Servicers may offer a short-term repayment plan based on an evaluation of incomplete loss mitigation option; the servicer cannot move forward with any first notice or filing if the borrower is performing on the repayment plan. Servicers must notify borrowers in writing when a loss mitigation application is complete within 5 days of its completion. Servicers must give borrowers a reasonable date by which to return the required documents for a loss mitigation option.

66 LOSS MITIGATION PROCEDURES Servicers must use reasonable diligence and efforts to obtain any third-party information when evaluating a loss mitigation application and cannot deny a borrower solely because such information is lacking, unless the servicer was unable to obtain said information for a significant period of time. Servicers must affirmatively prevent foreclosure judgement and/or sales while a complete loss mitigation application is pending.

67 LOSS MITIGATION PROCEDURES Servicers may join the foreclosure action of a subordinate lien holder without adhering to the 120-day prohibition on filing. Servicers may suspend work on a loss mitigation application during short term forbearance or repayment plans; servicers must resume those efforts if the borrower defaults or requests assistance.

68 SUCCESSORS IN INTEREST Confirmed successors in interest are borrowers and consumers and are therefore entitled to protections under the mortgage servicing rules. Successors in interest are defined as persons who receive ownership interest in the property by: Devise or descent, or by inheritance from a deceased relative. Right of survivorship from a deceased joint tenant. Transfer from a spouse or a parent. A transfer incident to a divorce, legal separation and /or property settlement. Transfer into an inter vivos trust for the benefit of the successor in interest.

69 PROCESS FOR CONFIRMING SUCCESSORS IN INTEREST The Bureau requires all servicers to act/respond quickly to a possible successor in interest who contacts the servicer by providing a written list of information required to confirm the person s status as a successor in interest. The required information must be reasonable. Servicers must have policies and procedures to help with their compliance with these successors in interest. Servicers are not required to proactively search for a possible successor in interest.

70 SERVICING TRANSFERS The transferee servicer must meet all of the deadlines and requirements for loss mitigation under Regulation X. Those deadlines are based on the date the application was received by the transferor servicer. A transferee servicer must: Comply with the requirement to evaluate the borrower for all loss mitigation options within 30 days of receipt by the transferor servicer of complete loss mitigation application. Allow the borrower to accept a pending loss mitigation option which was pending as of the transfer date and honor the unexpired time period for the borrower to accept the offer given by the transferor servicer.

71 SERVICING TRANSFERS (CONTINUED) Make a determination on an appeal within the later of 30 days of the transfer date or 30 days of the appeal date, or the transferee servicers must treat the appeal as a complete loss mitigation application. Not file a first notice of foreclosure until after the date disclosed to the borrower from the transferee servicer for the submission of a complete loss mitigation application. Send the acknowledgement notice within 10 days of the transfer date if the transferor servicer has not and the acknowledgment period has not expired.

72 SAFE HARBORS FROM LIABILITY UNDER THE FAIR DEBT COLLECTION PRACTICES ACT Servicers commit no violation when: Communicating about the mortgage loan with confirmed successors in interest. When providing a written early intervention notice required by Regulation X to a borrower who has invoked a cease communication. When responding to a borrower-initiated communication concerning loss mitigation after the borrower has invoked a cease communication.

73 QUESTIONS